Category Archives: Advertising

Ad-blockers and product quality

By | Advertising, Startup general interest | One Comment

The rights and wrongs of ad-blockers have been debated for years. My view is that people who block ads are choosing to free-ride on users who don’t, and whilst I would stop short of calling it immoral, I don’t think it’s good behaviour. However, the number of people blocking ads has always been relatively small and the subject has mostly been of academic interest. The interesting thing now is that post iOS 9 that might change.

Three forces are at play here:

  • The trend to mobile – smaller screens and slower connections make ads more intrusive
  • Growth in support for the the anti-ad/pro-privacy meme
  • It’s getting easier for users to block ads

The Apple vs Google battle is an important part of the backstory. As Jason Calacanis details here, Apple’s assault on ads and its pro-privacy position helps in the iPhone vs Android battle and is a direct attack on the core of Google’s business.

Also important is that the online advertising industry still hasn’t got it’s act together. Ten years ago I was hopeful that the adtech was on a trend to become more about product, less about relationships and in the process would shed a lot of it’s shadier practices. That manifestly hasn’t happened and we still have an over-complicated landscape characterised by opaque relationships and misaligned incentives that doesn’t serve advertisers as well as it could.

Meanwhile larger advertisers have been moving an increasing percentage of their budgets online (they have to go where the audience is) which is crowding out startups.

It’s still early days for iOS 9 ad-blockers, but it seems likely we will see an acceleration of the trend of startup founders focusing on product quality as a way of rising above this mess. Since the advent of social media native advertising, earned media, and customer referrals have been growing in importance as part of the startup advertising mix and they work best for high quality products.

Moreover, the products that really win in this environment aren’t simply of high quality, they are also noteworthy, delivering moments of ‘wow’ that stick in the mind.

More evidence that traditional ad models are challenged

By | Advertising, Facebook | 3 Comments


Figures are in billions. 2015 figures are projections for the full year.

I’ve long thought that overload of messages in our lives is leading to ad-blindness and that paid business models are increasingly more attractive. This chart I just saw on Techcrunch re-enforces that view.

In-app purchases are still a relatively new phenomenon and many companies and industries are still figuring out how to get the most from them. Games makers have got it down pat now, but other content companies not so much. There’s still lots of growth to come.

Mobile ads I’m not so sure about. Large properties with sophisticated targeting will continue to do well and it will be interesting to see where Facebook, Twitter, and the big messaging companies go next. Smaller properties and the various ad networks they work with may have a tougher time, particularly now Apple has enabled ad-blocking in iOS 9.

Note that Facebook’s mobile ad revenues were $2.9bn in Q2 and are growing 60% year on year. If you backed them out of the purple bars in the chart above then there wouldn’t be much growth left.

Marketing platforms for startups

By | Advertising | One Comment

US internet audience

This chart shows where audiences are accumulating by number of users and average amount of time spent. Multiply the two together and you have total number of hours spent by property, which is a rough proxy for the size of the advertising opportunity.

New advertising platforms are best for startups when they are growing from big to very big. When they become huge traditional brands move in driving prices up and they become less useful.

For most startups these days Facebook is best whilst it’s harder to make the customer acquisition costs vs life time value equation work on Google. CPCs have held steady at Facebook over the last year, and even declined in ecommerce, but it’s only a matter of time before they go up from their current average of $0.53 (ecommerce $0.43).

Looking at the chart above you’d expect Whatsapp, Snapchat, YouTube and Gmail to be the next places for startups to go, but none of these has really opened up their platforms well yet. Amongst the smaller players Twitter is perhaps the most advanced with it’s ad platform, but as you can see the product of their audience size and time spent is not that significant.

Thanks to Tom MacThomas, our Head of Marketing, who helped with this post.

Facebook is a powerful advertising platform

By | Advertising, Facebook | 6 Comments


You can see from the charts above (originally on Techrunch) that Facebook is getting stronger and stronger as an advertising platform. So long as advertisers are spending rationally, which is a good first order assumption, then if ARPUs are rising then ads are becoming more effective.

Perhaps unsurprisingly, none of this is happening by accident. Facebook has been improving ad measurement, improving app speed, and pushing video to increase time-on-site. And that’s just what I read about today.

We see this amongst our partner companies too, many of which are now finding Facebook a much better platform than Google. That’s particularly true for those selling a novel product or service – people don’t know they want it so they aren’t searching for it, but well targeted ads Facebook can excite demand.

Social network usage is starting to drop

By | Advertising, Facebook, Startup general interest | 5 Comments

2014 has been a great year for social media marketing. A number of our companies have enjoyed great success advertising on Facebook and they’re not alone. Facebook is forecasting Q4 revenues of $3.6-3.8bn, up 40-47% on the year ago quarter. Yet, paradoxically in some markets social network usage is starting to drop:

weekly social network access

As you can see from this chart it is in the US, China, and particularly the UK that consumers are turning away from social networks, and it’s a fair bet that the trend in these countries will be seen more widely next year.

The best guess is that users are shunning Facebook et al for messaging apps, which goes a long way to explaining Facebook’s $19 billion purchase of WhatsApp earlier this year.

This means that we can expect Facebook advertising to become more competitive next year. Buoyed by the success stories from 2014 bigger brands and bigger budgets will come to the platform whilst inventory remains the same or declines, at least in the UK or US. That means higher prices. We’ve seen the same trend play out on Google over the last few years where paid search in many categories is now too expensive for startups.

As this plays out entrepreneurs will be forced to look at newer platforms and one of the interesting things will be whether messaging apps emerge as an interesting advertising category.

The rise of native advertising

By | Advertising | 8 Comments


There’s an interesting post up on Stratechery asking whether we are approaching Peak Google which features the graphic above. The central argument is that in the way IBM fought to protect their PC platform and missed the Windows opportunity and Microsoft fought to protect its Windows franchise and missed the web opportunity Google will fight to protect their search platform and miss the native advertising opportunity. Search is a c$50bn out of a total advertising market of c$450bn, and hence a winner in native advertising winner could be bigger than Google.

I’m a big believer in the increasing importance of native advertising. The best companies these days have interesting products and brands that lend themselves to this new medium. That said, I’m not sure that means another company will eclipse Google. Search always looked like it might have one major winner, but I don’t see the same network effects at play in native advertising which will find its audiences on the multiple content sites where they hang out.

A brief and not-so-kind history of web advertising

By | Advertising | One Comment

You could chart the history of web advertising like this (quotes from Adrian Saunders/

  1. Display ads from Yahoo and AOL: “Incredible returns! Trackable analytics on reader behavior! Just like the print ads you know and love, only cheaper and with better metrics!”
  2. Google Adwords, Demand Media: “Publish what you want, when you want, and make a living through Google Adwords! Build a business outside of the stranglehold of portals! Show readers ads that they’ll actually want to click! Keep optimizing the hell out of your stuff and you’ll turn this into a business any day now!
  3. Facebook and Twitter: “Forget everything but social, where people read and consume content based on other people’s recommendations! Build up social capital, focus on “sharing” and watch your amazing work go viral! You’ll receive more traffic than you’ll ever need to make the business work!”
  4. Mobile: “Everything before was a falsehood, the reality is that everyone is on their phones now. Mobile is where advertising is really going to take off…”

And now the new hotness is content marketing and it’s close cousin native advertising, ref A16Z’s investment in Buzzfeed).

The analysis above is a bit unkind in that entrepreneurs have built businesses on the back of display ads, Google Adwords, social and mobile, and critically it ignores search advertising. However, there’s more than a grain of truth in it. Nobody is enamoured with display ads anymore, everyone understands that unless you have massive traffic you only make pennies from Google Adwords, and mobile has already taken a big chunk out of desktop social (albeit that much of it is mobile social).

Ultimately the important question is: is web advertising moving forward?

For me the answer to that is a clear ‘yes’. Search marketing is the most efficient way of connecting people with things they want the world has ever seen, social is developing into a great way to connect people with things they might want to buy but don’t know exist, and now content marketing allows brands to build authentic and high value relationships with potential customers. Moreover, from a startup perspective you can make these channels work at the small scale you need in the early days of your business.

That said, there is a constant feel of “emperor’s new clothes” about the web advertising world and it’s important to look beyond the hype.

A big industry is born and peaks within 13 years

By | Advertising, Facebook, Startup general interest | One Comment

It’s been widely reported this morning that music downloads are now in decline. If you take the launch of the first iPod as the date when music downloads started to become a meaningful market then the time from inception to decline is a meagre 13 years.

As an indicator of the significance of the download market, remember that it was the iPod that saved Apple after Jobs returned to the company – according to Wikipedia iPod revenues peaked at $4bn in Q4 2007 and were 42% of Apple’s sales in that period (I imagine that there was an Xmas boost and that iPod sales were a lower percentage over the whole year, but I don’t have the data).

Apple, of course, came up with the iPhone and has prospered in spite of the declining significance of music downloads, but this story shows how quickly new markets spin up and down these days and how fleet of foot companies have to be to survive and prosper. This is why Google is launching driverless cars and Facebook is bought Occulus Rift – the pressure to come up with significant new innovations gets greater and greater as the pace of change increases.

Yesterday I noted that the desktop advertising has also peaked. There’s a similar story there. If you take the 1995 Netscape IPO as the start of the internet advertising market then that industry went from inception to decline in 19 years.

New markets spinning up creates opportunities for startups and when they spin down it’s because a new industry is spinning up, with more opportunity for startups. The faster this happens the better it is for those of us in the startup world.


Desktop advertising in decline

By | Advertising, Mobile | 2 Comments

Latest research out from eMarketer predicts that the US desktop advertising market will shrink by 1% this year.

Desktop advertising in decline

The other side of the coin is of course continued rapid growth in mobile, which is forecast to surpass desktop advertising by 2016.

The future is smartphones. Full stop. eMarketer predict that the average US consumer will spend 2 hours 51 minutes per day with on their phones this year, excluding voice.

Facebook remains the dominant social network

By | Advertising, Facebook, Twitter | No Comments

screen-shot-2013-12-30-at-15-54-02It may be that teenagers are deserting Facebook and that their future prospects aren’t as rosy as they were maybe a year ago, but the chart above makes it clear that Facebook is in a much stronger competitor than any of it’s competitors. LinkedIn, Pinterest, Twitter and Instagram are all great businesses that either have their use as marketing channels or soon will do, but Facebook remains the grand-daddy of them all. With the exception of LinkedIn these are all advertising based businesses so think of it this way – if you are targeting all US online adults you will find 70% of your target market on Facebook, and only around 20% on each of the other sites.

Get Social

Blog Newsletter Sign Up

Enter your Email:
Preview | Powered by FeedBlitz